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Newsmakers : Biggs Leaving Morgan Stanley To Manage Hedge Fund

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Some Wall Street executives retire to play golf and spend more time with their families. Barton Biggs, 70, Morgan Stanley’s chief global strategist, is “retiring” later this year after 30 years with the investment bank to lead a new firm,Traxis Partners.Traxis will manage a hedge fund portfolio for Morgan Stanley. Biggs also will serve as a consultant to Morgan Stanley. Biggs ran the investment bank’s tactical assetallocation business, with some $10 billion under management. Traxis Partners will be formed by Biggs, along with Cyril Moulle-Berteaux, 33, a managing director of Morgan Stanley Investment Management, and Madhav Dhar, 41. Dhar, a 15-year veteran of Morgan Stanley, left in 1999 after being in charge of its emerging markets investments.The new hedge fund is expected to invest in stocks, bonds and currencies worldwide.

The world has long been Biggs’s oyster. One of the leading experts in emerging markets, Biggs got his first real exposure to the business in the mid-1980s, when the International Finance Corporation asked Morgan Stanley to set up the first country funds.The firm launched funds under the IFC’s auspices for Thailand, Malaysia and Turkey, among other countries. Biggs a value-oriented investor, joined the bank in 1973 as a managing director and general partner.He was the firm’s first research director. “Morgan Stanley has been my investment home for three decades, and there has been no better crow’s nest from which to view the world,” he says.

A long-term bear, he seems to have mellowed in recent years.“I maintain that because everyone knows all the risks, they are pretty much discounted,” he wrote in a commentary in early 2003. “The biggest risk may be in not taking a risk.”

SPAIN

ALL CHANGE AT LA CAIXA

Politics and business are inextricably interlinked in much of Continental Europe, something that Josep Vilarasau, the departing chairman of La Caixa, Spain’s third-largest bank, knows all too well. The 71-year-old has been forced out after a quarter of a cen-tury by a law passed with him as target.

La Caixa is more than just a financial institution in Catalonia, the prosperous northeastern Spanish region with Barcelona at its heart. The savings bank has taken advantage of dereg-ulation to take on competitors in new markets, while maintaining its central role in Catalan life. As a caja de ahorro, or Spanish savings bank, La Caixa is responsible to a wide range of owners, ranging from reli-gious foundations to politicians.

It’s the politicians that have done for Vilarasau. The cajas rep-resent a powerful accumulation of economic and political power, and the conservative Popular Party, which forms the government in Madrid, has its eyes firmly set on scaling the heights of La Caixa. Worried that it might lose its grip on power after ruling Catalonia since it gained regional autonomy, the nationalist party under Jordi Pujol passed legislation limiting to 20 years the period for which presidents of cajas could serve. That’s forced Vilarasau to resign this coming June. Presenting the Caixa’s annual report in Jan-uary, Vilarasau made no secret of his disap-pointment at having to retire.

Underlying the incident, however, lies the issue of whether the caja system, so effective at mobilizing regional pools of savings in the boom years after Spain’s return to democracy in the late 1980s, might prove as appropriate in the new century.

—Mark Johnson

AUSTRALIA

HIGH JINKS DOWN UNDER

HIGH JINKS DOWN UNDER Leaving school after 10th grade didn’t preclude Ray Williams, the founder and former CEO of Australian insur-ance company HIH, from getting a doctorate. Monash Univer-sity, which received $1.3 mil-lion from Williams and his company, awarded him an honorary one.

Such details surrounding HIH’s expenditure are outlined in thousands of documents put before a royal commission set up to examine Australia’s largest corpo-rate collapse. There’s the company Christ-mas bash costing $435,000, the $2.8 million lump sum paid to Williams in 1992, Williams’s wife’s $30,000 travel expenses for one year, the $5,300 spent on three meals in as many weeks. In 2000 alone, Williams and three other executives spent $17.7 million on “dis-cretionary” matters. The commission’s counsel has detailed more than 1,000 adverse findings in the running and auditing of HIH and FAI (an insurance company that HIH took over) before reality caught up with the company in late 1998. When HIH was liquidated in March 2001, it left $3 billion of unpaid debts.

At the end of February the commission will have to decide whether to recommend criminal charges against Williams and other senior managers. The counsel’s report flags more than 50 possible breaches of Aus-tralia’s corporations law. The main alleged offenses include fraudulent reinsurance con-tracts, irregular payments made to individu-als, and HIH’s inadequate provisioning. Williams could be prosecuted for hiding reports of the company’s losses.

Even if Australia’s public prosecutors don’t chase up on what the commission has called Williams’s “dishonest actions,” others will. A line of class suits is in place on behalf of the bankrupt group’s shareholders and creditors. “The repercussions of the collapse are continuing and will likely continue for some years to come,” said the counsel’s QC at the commission.

—Benjamin Beasley-Murray

UNITED KINGDOM

KNAPP GETS SECOND CHANCE

Less the comeback kid, more the guy who never went away, Barclay Knapp has now got a whole new task on his hands.The man who spent more than $11 billion in building NTL into a symbol of cable industry hubris now has just $500 million in the bank to make a go of the new company.

In January the southern England-based company emerged from an eightmonth- long Chapter 11 process that swapped some $10.9 billion of debt for shares, handing the keys of the company to bondholders. Almost alone among NTL senior manage - m e n t , K n a p p kept his job through and out the other side of the bankruptcy proceeding.

The new owners will be watching closely how Knapp performs in his newly straitened circumstances, and the 46-year-old Nebraskan will certainly have his work cut out. Industry analysts doubt that NTL has a future as a standalone company. Its aim is squarely on converting customers into “triple-users”— taking their phone, Internet and cable services from the same provider.

Knapp faces some formidable opponents in this new stage of the game, While NTL has been working through its debt problems, BskyB has firmed its market leadership in the UK cable market, while BT has rolled out harder-tobeat telephone packages.

But the toughest foe of all may prove to be Knapp’s own legacy. NTL snapped up as many as 20 companies while Knapp had the pocketbook jammed open. Failure to integrate those purchases contributed mightily to NTL’s lingering reputation for rock-bottom customer service.

Knapp used to relish running the company from Princeton, New Jersey; the line was, he needed to be close to the money to fund his deals. Now he’s in Chelsea, London. Call it an upscale way of living over the shop.